Refund of “incoming” VAT: experience of Acsour's clients

LEGAL DIGEST \ 19.03.2020

We are glad to inform you that several of Acsour’s clients have successfully used amendments to the Tax Code of the Russian Federation and were able to receive VAT refund from the budget.

As is known, starting from July 1, 2019, organizations have been able to obtain reimbursements from the state budget of VAT amounts for purchases used for the implementation of works and services supplied to foreign clients.

The new rules apply to companies that perform works and provide services outside the Russian Federation. At the same time, VAT amounts will be reimbursed for those purchased goods, works and services that will be accepted for recording not earlier than July 1, 2019. For example, VAT amounts for the leasing of offices will be subject to deduction.

In order to obtain a refund of VAT from the state budget, it is necessary to observe the following conditions:

• The purchased goods, works and services must be used for sale outside the Russian Federation;
• The purchased goods (works, services) must be accepted for recording (registered) not earlier than July 1, 2019;
• The company should have a properly issued invoice or universal transfer document from the supplier;
• Not more than three years should pass from the moment the purchased goods are registered.

It is important to note that organizations no longer need to keep separate records of “incoming” VAT for foreign transactions, since they are now equated with transactions that are subject to VAT.

Today, Acsour’s clients from the IT industry who have successfully undergone all the necessary procedures have already used the opportunity to have the amount of “incoming” VAT reimbursed from the state budget.

If your company would like to have this experience, it is necessary to take the following points into consideration:

1. If the bodies of the FTS do not have sufficient information from the documents submitted, the company may be called before the tax authorities.
2. The company may be asked to make comments on its business and development plans.
3. The company should give explanations regarding contracts for the purchased goods, works and services with respect to which VAT amounts have been claimed as deductible.
4. The company may be asked to analyze the transaction in question and the economic validity of its expenditures.
5. The bodies of the FTS may request explanations of those works and services that are sold to foreign clients.

Please note that companies cannot exercise the right to deduct if the works and services provided are listed in article 149 of the Tax Code. Such transactions are not subject to VAT (for example, granting rights to use software under a license agreement). Consequently, the VAT related to such transactions is still included in the expenses.

It is also worth noting that this new development is mandatory in nature: companies do not have the option to include this VAT in their expenses for income tax purposes if they do not want to deduct the amount of “incoming” tax.

Please contact Acsour’s specialists regarding issues relating to the application of tax legislation.